Redefining what it means to be a risk professional in a Covid-19 world

By Annette Stafford-Evans

UNTIL 15 months ago, the risk models and management practices of the banking world assumed that, with a few exceptions, the world would mostly carry on in a similar direction at a comfortable speed.
However, Covid-19 threw us for a loop there! It took the pressure we already felt from the rapid absorption of the Fourth Industrial Revolution (4IR) advancement—issues of privacy, cyber risk, conduct and evolving customer landscapes—and turned the heat way up.
Overnight, everything changed, in ways none of us could have foreseen. Our customers were placed under pressure to keep the lights on, the doors open and their staff and families fed. The channels that had worked so well to connect and interact with co-workers and clients were suddenly less available and new paths had to be found. Capital, profit and loss were impacted. As banks, at the centre of the financial and functional world, we felt every single shift.
In the mad scramble to adjust and adapt, it wasn’t just our current business operations that took strain, but also the need to take care and protect our most valued asset – our people.
The rapidly changing environments and associated risks, especially those that interrupted business, needed to be faced head-on. Risk models, by their very nature, need a degree of rigidity in their assumptions and boundaries; they require accurate historical data to be effective and predict future shifts. Having been designed before global lockdowns, shutdowns and shake-ups, they were significantly challenged.
Without the certainty of how the pandemic may evolve, accurately assessing a customer’s creditworthiness was challenging. We needed to be careful not to overreact to the financial stresses and impacts of shrinking profit and loss.
As a function, risk management needs to be more than just a guardian; it must move closer to strategic decision-making at the heart of the business—more steering wheel, less handbrake. And we, as the risk professionals at the forefront of these changes, needed to adopt an entrepreneurial spirit and boldness but still supported with available data.
I was appointed as Nedbank’s Risk gatekeeper in March 2020 – ensuring that forward-thinking risk management would have a seat at the table as the bank embraced the 4IR expansions. While we once explored risk in our separate siloes, connected risk exploration became the next evolutionary step we took. Adequate preparation must be a team effort, where we draw on our collective wisdom and insights to chart robust but adaptable solutions.

HUMAN CAPITAL IS KEY

Three thousand risk management experts were surveyed earlier this year for the Allianz Risk Barometer, uncovering the top10 business risks that leaders must watch out for in 2021. The top three are considered to be: business interruption, pandemic outbreak and cyber incidents, or as some may say, the “pandemic trio”. However, human capital risk continues to pose significant challenges for financial services, as it now has broad enterprise risk management implications and significant financial costs beyond business operational losses.
At Nedbank the executive team recognises and proactively manages the merging human capital engagement. This is not just a different way of thinking and acting. It’s a different way of being, one that approaches every question, issue, topic, and decision from a human angle first.
We value our people highly, providing numerous interventions for their well-being. As the Covid-19 pandemic hit Namibia in 2020, Nedbank immediately allocated financial resources to ensure the health and safety of staff and customers. Significant contributions continue to be allocated monthly. We have partnered with physical and mental health professionals to support our employees and their dependents.

A WHOLE NEW WORLD

The banking industry’s collective response to the pandemic has been notable. In a matter of weeks we had to transition to virtual engagements, accelerate digital plans and execute an untested operating model. We made mistakes but ensured to learn from them to better serve customers, enable employees to work remotely, and put our regulators at ease.
As we move forward, Covid-19 has taught us that we must realise previously assessed ‘low-frequency, high-severity’ risk events will become more frequent, and possibly more severe.
But, as with all dramatic change, things should be viewed more exciting than exasperating. As financial professionals, risk managers, and leaders, we need to consider what we can do, rather than being hamstrung by what we can’t. This new world is light on rules, which means we can write them ourselves. It is foundational and undeveloped, which means we can build a new world upon it.
And, even though the new roads have yet to be paved, the gates still need to be maintained. Thus, as risk professionals, we need to constantly think about what is still to come, to build scenarios and work together with colleagues and collaborators so that our collective potential can be realised.
Our approach is people first, especially now. Much of our organisational future lies in the unlimited potential of our current and future employees.
* Annette Stafford-Evans is Nedbank Namibia’s Chief Risk Officer